Posted on 10/28/2010 6:37:50 PM PDT by blam
Globalization Creates Unemployment, American Job Losses Are Permanent
Politics / Employment
Oct 28, 2010 - 04:59 AM
By: Paul Craig Roberts
Now that a few Democrats and the remnants of the AFL-CIO are waking up to the destructive impact of jobs offshoring on the US economy and millions of American lives, globalism’s advocates have resurrected Dartmouth economist Matthew Slaughter’s discredited finding of several years ago that jobs offshoring by US corporations increases employment and wages in the US.
At the time I exposed Slaughter’s mistakes, but economists dependent on corporate largess understood that it was more profitable to drink Slaughter’s kool-aid than to tell the truth. Recently the US Chamber of Commerce rolled out Slaughter’s false argument as a weapon against House Democrats Sandy Levin and Tim Ryan, and the Wall Street Journal had Bill Clinton’s Defense Secretary, William S. Cohen, regurgitate Slaughter’s claim on its op-ed page on October 12.
I sent a letter to the Wall Street Journal, but the editors were not interested in what a former associate editor and columnist for the paper and President Reagan’s Assistant Secretary of the Treasury for Economic Policy had to say. The facade of lies has to be maintained at all costs. There can be no questioning that globalism is good for us.
Cohen told the Journal’s readers that “the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities.” I bet Buffalo “and other American cities” would like to know where these jobs are. Maybe Slaughter, Cohen, and the Chamber of Commerce can tell them.
Last May I was in St. Louis and was struck by block after block of deserted and boarded up homes, deserted factories and office buildings, even vacant downtown storefronts. Detroit is trying to shrink itself by 40 square miles. On October 25, 60 Minutes had a program on unemployment in Silicon Valley, where formerly high-earning professionals have been out of work for two years and today cannot even find part-time $9 an hour jobs at Target.
The claim that jobs offshoring by US corporations increases domestic employment in the US is one of the greatest hoaxes ever perpetrated. As I demonstrated in my syndicated column at the time and again in my book, How The Economy Was Lost (2010), Slaughter reached his erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting the data to reflect the acquisition of existing firms by multinationals and for existing firms turning themselves into multinationals by establishing foreign operations for the first time. There was no new multinational employment in the U.S. Existing employment simply moved into the multinational category from a change in the status of firms to multinational.
If Slaughter (or Cohen) had consulted the Bureau of Labor Statistics nonfarm payroll jobs data, he would have been unable to locate the 5.5 million jobs that were allegedly created. In my columns I have reported for about a decade the details of new jobs creation in the U.S. as revealed by the BLS data, as has Washington economist Charles McMillion. Over the last decade, the net new jobs created in the U.S. have nothing to do with multinational corporations. The jobs consist of waitresses and bartenders, health care and social services (largely ambulatory health care), retail clerks, and while the bubble lasted, construction.
These are not the high-tech, high-paying jobs that the “New Economy” promised, and they are not jobs that can be associated with global corporations. Moreover, these domestic service jobs are themselves scarce.
But facts have nothing to do with it. Did Slaughter, Cohen, the Chamber, and the Wall Street Journal ever wonder how it was possible to have simultaneously millions of new good-paying middle class jobs and virtually the worst income inequality in the developed world with all income gains accruing to the mega-rich?
In mid-October Treasury Secretary and Goldman Sachs puppet Tim Geithner gave a speech in California in the backyard, or former backyard, of 60 Minutes’ Silicon Valley dispossessed upper middle class interviewees in which Geithner said that the solution is to “educate more engineers.”
We already have more engineers than we have jobs for them. In a recent poll a Philadelphia marketing and research firm, Twentysomething, found that 85% of recent college graduates planned to move back home with parents. Even if members of the “boomeranger generation” find jobs, the jobs don’t pay enough to support an independent existence.
The financial media is useless. Reporters repeat the lie that the unemployment rate is 9.6%. This is a specially concocted unemployment rate that does not count most of the unemployed. The government’s own more inclusive rate stands at 17%. Statistician John Williams, who counts unemployment the way it is supposed to be counted, finds the unemployment rate to be 22%.
The financial press turns bad news into good news. Recently a monthly gain of 64,000 new private sector jobs was hyped, jobs that were more than offset by the loss in government jobs. Moreover, it takes around 150,000 new jobs each month to keep pace with labor force growth. In other words, 100,000 new jobs each month would be a 50,000 jobs deficit.
The idiocy of the financial press is demonstrated by the following two headlines which appeared on October 19 on the same Bloomberg page:
“Dollar Index Appreciates as Geithner Supports Currency Strength”
“Geithner Weak Dollar Seen as U.S. Recovery Route”
To keep eyes off of the loss of jobs to offshoring, policymakers and their minions in the financial press blame US unemployment on alleged currency manipulation by China and on the financial crisis. The financial crisis itself is blamed by Republicans on low income Americans who took out mortgages that they could not afford.
In other words, the problem is China and the greedy American poor who tried to live above their means. With this being the American mindset, you can see why nothing can be done to save the economy.
No government will admit its mistakes, especially when it can blame foreigners. China is being made the scapegoat for American failure. An entire industry has grown up that points its finger at China and away from 20 years of corporate offshoring of US jobs and 9 years of expensive and pointless US wars.
“Currency manipulation” is the charge. However, the purpose of the Chinese peg to the US dollar is not currency manipulation. When the Chinese government decided to take its broken communist economy into a market economy, the government understood that it needed foreign confidence in its currency. It achieved that by pegging its currency to the dollar, signaling that China’s money was as sound as the US dollar. At that time, China, of course, could not credibly give its currency a higher dollar value.
As time has passed, the irresponsible and foolish policies of the US have eroded the dollar’s value, and as the Chinese currency is pegged to the dollar, its value has moved down with the dollar. The Chinese have not manipulated the peg in order to make their currency less valuable.
To the contrary, when I was in China in 2006, the exchange rate was a little more than 8 yuan to the dollar. Today it is 6.6 yuan to the dollar--a 17.5% revaluation of the yuan.
The US government blames the US trade deficit with China on an undervalued Chinese currency. However, the Chinese currency has risen 17.5% against the dollar since 2006, but the US trade deficit with China has not declined.
The major cause of the US trade deficit with China is “globalism” or the practice, enforced by Wall Street and Wal-Mart, of US corporations offshoring their production for US markets to China in order to improve the bottom line by lowering labor costs. Most of the tariffs that the congressional idiots want to put on “Chinese” imports would, therefore, fall on the offshored production of US corporations. When these American brand goods, such as Apple computers, are brought to US markets, they enter the US as imports. Thus, the tariffs will be applied to US corporate offshored output as well as to the exports of Chinese companies to the US.
The correct conclusion is that the US trade deficit with China is the result of “globalism” or jobs offshoring, not Chinese currency manipulation.
An important point always overlooked is that the US is dependent on China for many manufactured products including high technology products that are no longer produced in the US. Revaluation of the Chinese currency would raise the dollar price of these products in the US. The greater the revaluation, the greater the price rise. The impact on already declining US living standards would be dramatic.
When US policymakers argue that the solution to America’s problems is a stronger Chinese currency, they are yet again putting the burden of adjustment on the out-of-work, indebted, and foreclosed American population.
"President Ronald Reagan and Treasury Secretary Donald Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department's Meritorious Service Award for "outstanding contributions to the formulation of United States economic policy"
A lot of what is being said here about outsourcing is pure nonsense. Many of the jobs now being outsourced are highly skilled jobs, including all sorts of skilled jobs in the computer and software industries, engineering jobs, accounting and tax preparation, radiologists, draftsmen, and any other sort of skilled work that can be performed and transmitted back and forth via modern communications systems. And, of course, all sorts of help centers and order centers were among the first jobs to be outsourced to cheap labor nations.
The only jobs not being outsourced to some degree are jobs that simply cannot be performed offshore.
On a side, today a busload of workers working for an AMERICAN company in Mexico were targets of the Drug cartel. I wonder if the American companies that went to MX after NAFTA was passed will be coming back to the U.S. or send production on to another third world country.
BTT
BTT
They might move to places like Vietnam and Laos and other very poor nations. Wages in China are getting to around $1.50 per hour and that's just more than some trans-nationals think they should have to pay.
Are we talking about the same person?
From 2005 to 2007 he was on leave from Dartmouth while he served on the Council of Economic Advisers. Dr. Slaughter joined the Faculty of Arts & Sciences at Dartmouth in 1994 and a member of the Tuck School faculty in 2002. He is a recipient of the university’s John M. Manley Huntington Teaching Award, and a member of Phi Beta Kappa. Dr. Slaughter received his bachelor’s degree summa cum laude from University of Notre Dame in 1990, and his doctorate from the Massachusetts Institute of Technology in 1994.
Ditto. Recently a book came out describing the profile of Wall Street bankers in New York city. Democrats will have you believe it is dominated by white Anglo Saxon Protestants Republicans, who believe in the conservative notion of small government and no regulation. That is far from the truth. Wall Street bankers want no regulations for finance except when it impacts small and medium size financial companies who can represent future competitors if they get a chance to grow. Big government is considered a useful tool when needed to eliminate competitors and barriers to their selfish goals. Wall Street already learned how to influence government via donations, lobbyists and infiltrating the Treasury and Federal Reserves with allies and seducing them with prospect of lucrative jobs on Wall Street for federal officials/reps upon retirement. More then half of the bankers are of Jewish descent. This is a critical social dimension to the Wall Street psyche. Jews always supported a strong central government because it represents a safety net against possible prosecution by the majority. The Holocaust adds legitimacy to this viewpoint of the world. When you have many CEO’s who come from a ethnic group that feels naked and unprotected without a large powerful government, a leadership tone is set on how the Wall Street elites view big central government and social issues. That is why Wall Street CEO’s will lean Democrat/RINO, liberal on social issues and support big government except if it affects their ability to make money.
Very true. I believe the Chinese will stick with what serves their interests regardless of US governing class wishes. We'll counter by depreciating the dollar and either way, the US living standards will fall.
no no, Sorry I should have been clear in my posting.
That's about 600% productivity improvement. Most of it was done with NEW MACHINERY, COMPUTERS, OCR, IMPROVED SYSTEMS, a device I invented that saved one full man year every time we bought one ~ and we bought tens of thousands of them every year.
If we had not done all of that we'd needed another 3,600,000 employees!
BTW, not a single job was outsourced!
No, these are two different things. A global tax would distribute a part of the product created by Americans to someone else. WHen a company outsources, only the capital is moved abroad, and the honor of creating the product lies with the foreigners working for those companies. A redistribution of exhisting wealth vs. creation of new wealth -- think about that.
"Who is orchestrating this crap? Is it all the 'linked' groups that Glenn Beck talks about? "
No, it is orchestrated by the American public. We have become spoiled and acquired a feeling of entitlement that none of our predecessors had. We are 28th among the industrialized nations in graduating scientists and engineers. The vocabulary of the present-day teenager is about one half as big as in 1950s. We have not been saving for a rainy day since the early 1990s. And yet, we expert salaries higher than in the rest of the world, and expect someone else to bail us out in downturns of luck (Katrina) and economy (Detroit).
The truth is simple but painful: we are less and less productive and competitive. We are less productive because we dumbed down our system of education. We don't even partake of what it offers, spending thousands on LCD TVs every couple of years rather than $250 for a course at community college. Many Americans arriving in New Mexico are surprised that a visa is not required. After 9-11 vacation-tour operators were overwhelmed by people that were apprehensive to fly, insisting that they would prefer to go to Hawaii by bus rather than by plane. And yet those same people think they are entitled to a $20-50/hour salary. Nope. You can be ignorant or highly paid, but not both.
As nation we also have decided to become less competitive by roping ourselves with chains of regulation and taxation. The latter has just increased by the health-care reform, which prices so many more of American workers out of the market.
So what should you do with your retirement money? When spend money on goods, you want the best return --- least price for the same good. Investment is the same purchase: you buy future money (profit, which you need for later years of retirement) with the money you have today. The thinking is also the same: you invest in the most productive workers (actually, to do so you hire senior management of companies in which you invest, and they make decisions on your behalf). Those workers are now abroad: you don't have to pay for the onerous regulation there, for their health-care and pensions, or for the frivolous courts that go after deep (your) pockets rather than fairness.
The above elements are the only things that are new, not globalization of offshoring. It is they (we ourselves) that are responsible for the worsening condition of our middle class.
Glenn Beck is right only in one sense: the various elites heu unmasks are the doers here, the pushers of the above-mentioned changes. But it is we ourselves that allow that minority to rule over us. People rail against poor education, but how many of them get actually involved with the PTAs (which de Tocqueville praised as the essence of our democracy, as a field on which we practice self-government). People are upset about the leftism in our academia, but the donations to Harvard do not decrease. Nazis too were first a minority, but the majority chose to listen to them. Glenn Beck points to the doers, but it is the American public at large that agrees with them or remains indifferent; it is the American public at large who hgives Obama 47% approval rating after observing his deed. In sum, the American public gets what it wants and does but, disliking the results, looks now for the guilty parties --- the Wall Street, the Fed, the "rich," the corporations (as if it were not Main Street that owned Wall Street). The same as in Nazi Germany, where the same parties were vilified as the perpetrators of 1929, loss in the WW I, etc. (The only difference, so far, that in Germany they especially disliked "Jewish bankers" and claimed, of course, that all Jews are bankers. We may reach that point, too).
NP
The Chinese are trying to break this lower wage trap. Unlike the US, employment is a critical factor in regime stability. Unemployed Chinese workers is a threat to the authoritarian Chinese government. China pursues capitalism tempered by strategic needs. China will protect its emerging technologies, they will protect their technological advantages once they achieve it, they will secure their natural resources for their industries and most important they pursue a balanced policy of profits and employment. I always challenge freepers who pooh pooh the Chinese model. After twenty years of Chinese approach to capitalism and the American capitalist model, which nation has the trade surplus, government surplus, full employment and secured natural resources?
Here is an article from 2007 to support some of the things I mentioned in #22. There are many such articles if anyone wants to Google: "outsourcing skilled jobs", or something similar.
High-skilled jobs in finance and medical research going to India, study shows
Only a nitwit or someone profiting off these practices would seriously contend that this is good for the US economy. The only job security in the US at present is performing a function that absolutely cannot be performed offshore.
Makes it just like those Korean auto plants are about 100 miles offshore California or North Carolina, and China is really not as far, in terms of shipping costs, as Kansas City KS is from Louisville KY.
NOTE: The United States has only two great rivers to provide shipping to the interior ~ but that's all China has either. Europe has several. Africa has one. South America has two.
The navigable distance of the local waterways combined with modern international container shipping systems make many countries next door neighbors. Combine that with fiber optic communications capability, and the great manufacturing centers of China are a local phone call from the great manufacturing centers of America and Europe.
One disturbing trend is the US, and China, are losing port city frontage on the major rivers or the world ocean. We are backed up by the otherwise little used Gulf of California so we can expand into Mexico (See I35/I69 routing into Mexico). China can't do that readily without moving into areas now owned by Russia.
Yep. And the sound is emitted by the progressively more empty, dumbed down American brain, the owner of which demands a salary it does not deserve.
I’ll give you the crony capitalism, but offshoring is caused by the government subsidizing corporate investment overseas and guaranteeing their investments should they lose it because they did business with communist dictators in an unstable political environment.
The government used offshoring as bribes to get other things the globalists and neocons in our government were interested in. For example, they could get their hands on foreign aid money and distribute it to their corporate cronies without having ask congress for the money. Look at Condoleeza Rice and her board status of a ‘government’ corporation, the Millenium Challenge Corp.
The government used offshoring as a tool to implement directives from globalist cabals like the WTO, the World Bank, and the G20.
Much of our federal policy is negotiated outside this country, outside of the federal record and laws that require records of meetings and ‘sunshine’ on what our politicians do when they travel abroad. This has for all intents and purposes obsoleted congress from their duties as lawmakers, as laws are now written and implemented as written by global corporations seeking to institutionalize tax money infusions into their businesses.
India negotiates the H1B visa levels at the Doha, and other WTO ‘rounds’. They tell Congress what they want and they get it because globalists have insinuated themselves into every part of our government.
The government, and I mean Bush 1, Clinton,and Bush 2 used offshoring of manufacturing to slave labor countries, to reduce the costs of some goods so the economic indexes would not show inflation. In return, slave labor using nations like China, purchased Treasury bonds under newly implemented globalists rules for foreign investment , to keep a cash flow going into the government so it could expand astronomically in size.
That is really why offshoring was begun and why it is still being subsidized by wage earning American’s taxes. It is designed to destroy free enterprise in the American economy, lower American standard of living and redistribute our wealth to the corrupt antiAmerican transnational corporations and foreign governments similar to Mexico’s mordita.
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